A new law could strip charities of their tax-free status if they get too involved in politics.
The move has led to fears that charities such as Greenpeace and the Sensible Sentencing Trust may be less inclined to speak out.
Charities are often driven by people with a burning desire to
fight for a cause.
Having a cause can be difficult to separate from being political, but that is what the Charities Commission may soon be asked to do.
"Some of the charities that now have charitable status might lose it, but that would be either because they don't have a charitable purpose or what they do has changed since they were first formed," says Charities Commission chairman Sid Ashton.
From next February, the commission will have new powers to strip charities of their tax-free status if they become too heavily involved in politics.
"If there is any hint of political taint in this, New Zealanders will stand up in droves and change it," says Garth McVicar of the Sensible Sentencing Trust.
Labour is already moving to strip the Exclusive Brethren church of its rights to deny union officials entry into their work places on religious grounds.
The government denies it is an attack on civil liberties.
Prime Minister Helen Clark says perfectly valid charities have
from time to time taken a swipe at governments of all
"So there's obviously no intention to in any way threaten such organisations."
Under law a charity is defined as something which advances education or religion, relieves poverty or is beneficial to the community. But, if it gets involved in lobbying it must be a secondary role.
National finance spokesman John Key says the government move is outrageous.
"Most charities will say they do not want to get on the wrong
side of a government that's going to strip them of their
"And so we will see less advocacy and people will be less informed of the issues."
Key says many public donations to charities come because of the high profile they generate.
He says stifling the ability of charities to speak out is a dangerous road to go down and effectively, charities will be penalised for disagreeing with the government.
Key says there will be a huge range of charities from Plunket to Greenpeace seriously having to consider the advocacy role they play.
But the government says while the Charities Commission is government appointed it is an independent organisation and will not be subject to political interference.